When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. But John Marshall Bancorp, Inc. (NASDAQ:JMSB) has fallen short of that second goal, with a share price rise of 20% over five years, which is below the market return. The last year hasn’t been great either, with the stock up just 4.4%.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for John Marshall Bancorp
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
John Marshall Bancorp’s earnings per share are down 30% per year, despite strong share price performance over five years.
Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.
The modest 1.3% dividend yield is unlikely to be propping up the share price. We are not particularly impressed by the annual compound revenue growth of 0.08% over five years. So why is the share price up? It’s not immediately obvious to us, but a closer look at the company’s progress over time might yield answers.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Take a more thorough look at John Marshall Bancorp’s financial health with this free report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for John Marshall Bancorp the TSR over the last 5 years was 24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
John Marshall Bancorp shareholders are up 5.9% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 4% per year over five year. It is possible that returns will improve along with the business fundamentals. It’s always interesting to track share price performance over the longer term. But to understand John Marshall Bancorp better, we need to consider many other factors. Even so, be aware that John Marshall Bancorp is showing 2 warning signs in our investment analysis , and 1 of those can’t be ignored…
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
